Thursday, October 16, 2014

In the few days, the discussion of Russia has acquired a new
dimension. The announced withdrawal of Russian forces placed close to the
Ukrainian border and a slight but significant easing on the previously
blood-curdling rhetoric coming from Moscow has made some people think that the
crisis, fomented and largely organised by the Kremlin, may now be beginning to
ease.

Certainly the imposition of sanctions although it has had
relatively little direct effect, has indirectly caused the government of Vladimir
Putin some real problems. Western companies involved in the Russian market have
radically reconsidered the risks of doing business in Russia and almost all
have curtailed their investment plans. Some such as Blackstone and Adobe have
announced plans to leave the Russian market altogether. The market
capitalisation of the Moscow stock exchange has plunged. Inflation, at 8%, is
already climbing further. Russia has faced investment shortfalls for some time,
but is now facing huge capital flight- estimated at over £120 billion this year
alone. Emergency interest rate rises have failed to defend the Rouble, which
has fallen over 20% since the crisis began.

The core of the Russian economy remains energy. The World
Bank estimates that 16% of Russian GDP, 52% of its government revenues and 70%
of its export revenues come from oil and gas. The weakness of the global oil
price (Brent is trading at $85/bbl. as I write) is probably the major cause for
concern in the Kremlin right now, and as the markets price in a possible global
slowdown and both Saudi Arabia and the United States pumping at high levels,
together with the return of Libya and Iraqi oil to the global market, there is
little that seems able to support a sustained recovery in the oil price in the
coming months. Thus we are seeing open debate within the Putin administration
as to how to cut expenditure to fit these reduced circumstances.

Nevertheless, we should remain deeply concerned over the potential
use by Russia of its control of European gas supplies to threaten the stability
of the entire European gas market in order to support its continuing attacks
against Ukraine and to weaken support inside the European Union for the
democratic course that the Ukrainian people have chosen.

Since the bloodshed on the Maidan began in January, Russia
has illegally seized Crimea- although President Vladimir Putin assured the
world he would not- and been directly implicated in military operations in
Eastern Ukraine. The unconvincing denials and outright falsehoods put out by Mr
Putin and echoed by Kremlin funded propaganda outlets have undermined any trust
that we might have placed in the word of the Russian government. Shockingly
Russian military forces also appear to be ultimately responsible for the deaths
caused by the downing of Malaysian flight MH17. To add insult to injury, we should note the callous disregard that has been shown for the victims and their
families, with the despicable theft of victim’s valuables and their appearance
for sale on Russian websites.

Nor is it simply insult and rhetoric that Russia continues
to direct at Britain and its NATO allies.

Beyond the continuing Russian intervention in Eastern
Ukraine, Russian military activity continues at a high level. Large scale
“exercises” and regular incursions by Russian military aircraft into or close
to the airspace of Finland and Sweden as well as NATO states seems designed to
test NATO readiness, and maintain a high level of tension. The kidnapping of an
Estonian security officer on September 5th and the seizure of a Lithuanian
fishing boat in international waters on September 18th reminds us of
the continued pressure our Baltic allies have had to endure. Other activity in
cyberspace also suggests no let-up in the pattern of hostility towards NATO and
the EU.

Under these circumstances it is pretty hard for us to take
Russian assurances about their being a reliable partner in the European gas
market at face value. The Russian government has been prepared to use their
control over gas as a political weapon in the past, and there is a real chance
that they may do so in the coming winter.

Yet the strategic position of Russia is weakening. Greater
energy efficiency and new sources of power, such as renewables and shale gas is
already causing a structural shift in the global energy market. European demand
for Russian gas is also set to fall, as customers seek to diversify their
sources of supply- not least because Russia is now perceived as a threat, instead
of a partner. Mr Putin, not for the first time, has chosen a path of
confrontation that will ultimately cause major damage to Russia. Indeed, the
country may already be facing a period of considerable instability, and Mr
Putin’s popularity- currently said to be stratospheric- may prove to be very
shallow, as his problems mount.

Nevertheless, unless and until Russia gives up its reckless
adventure in Ukraine and respects international law, it is critical that we
keep up the pressure on the Putin regime. A further frozen conflict- as in
Georgia and Moldova- is unacceptable.

Russia has chosen a dishonest, dishonourable and dangerous path,
and Britain and its NATO and EU partners must maintain the current regime of
sanctions- and even add to them if necessary. There can be no return to
business as usual while Russia remains a real threat to European peace.

It is a threat that must be answered with a clear-eyed and
disciplined assessment of the long term costs of dealing with a rogue regime in
Moscow versus any possible short term benefits of a relaxation of the sanctions
regime.

Wednesday, October 15, 2014

Britain is in a fractious, ill tempered mood.Discontent with the political class festers, and every mountebank, from Alex Salmond to Nigel Farage is being seized on as someone who can break the perceived corruption in Whitehall and Westminster.Politicians are held- especially in the media- in widespread contempt.That, of course is the problem. It is not that politics is necessarily more negative or even more corrupt than it used to be, but rather that we have grown used to a mocking chorus from journalists who are guilty of even more egregious corruption than the politicians they condemn so loudly.MPs are paid a fraction of the sums given over to the self important blow-hards whose oleaginous faces adorn the top of their columns of angry and often surprisingly badly informed copy. Those who happily take their living from such dubious newspaper owners as the sinister and bullying Barclay brothers, the tax-avoiding Rothermere family, a Russian oligarch, a pornographer and of course Rupert Murdoch still presume to make moral judgements over those who have often made substantial sacrifices in order to serve their country.So as I read yet another load of twaddle from these people, I find it hard to suppress a very hollow laugh. The scandal that haunts Britain is not in politics, but rather in the media, which picks and chooses its stories to fit a biased and immoral agenda.So as a further storm of hypocrisy echoes across the op-ed pages of the British press, I find myself wordlessly turning the page and passing by such drivel. Across all political parties are people of genuine integrity and honesty, working to improve the country according to their lights. I may not agree with them, but I respect them. It is time for the media to accept that politicians are not all rogues or fools and to engage with the political process with a skeptical, rather than a contemptuous, eye.